The 2025 rate shift is reshaping the landscape for Canadian homeowners and buyers. As mortgage rates trend downward following recent Bank of Canada cuts, both challenges and new opportunities are emerging across the country.​ Let’s explore the best time to renewal in 2025 over this Mortgage Outlook.

The 2025 Rate Environment: What Changed?

In 2025, the Bank of Canada significantly reduced its policy rate from historic highs. After peaking at 5% in 2023, the overnight rate dropped to 2.5% by October 2025, with most forecasts suggesting a stable or slightly lower rate by year-end. Five-year fixed mortgage rates are now generally expected to range between 3.8% and 4%, while variable rates hover close to 3.7% to 3.9%. This notable drop is a response to weaker economic growth, rising unemployment, and tempered inflation, all of which pressured the central bank to ease borrowing costs for consumers and businesses.​

How Homeowners Are Affected

Many Canadian homeowners face a pivotal year, with approximately 2.2 million mortgages coming up for renewal. For these homeowners, payments are likely to increase despite falling rates, since today’s renewal rates are still much higher than the ultra-low levels seen during the 2020 and 2021 pandemic years.

Most analysts estimate monthly mortgage renewals in 2025 will see payment increases of 15–20%, and in some cases, especially those who originally locked in at record lows, up to 30–40%. This “payment shock” is being felt most acutely in expensive markets like Ontario and British Columbia. Still, homeowners nationwide should be reviewing their budgets and speaking with mortgage specialists for tailored advice.​

Opportunities and Challenges for Buyers

Falling mortgage rates have breathed new optimism into the 2025 housing market. Lower interest rates mean improved affordability on paper, and experts anticipate stronger sales activity in regions with more moderate home prices. However, buyers must still navigate high living costs and a persistent mountain of non-mortgage debt; the average Canadian owed nearly $26,000 in 2024 outside of their mortgage.

While Toronto and Vancouver homes remain challenging for most budgets, buyers in other provinces may find 2025 an easier entry point thanks to less competition and improved borrowing conditions.​

Policy, Economic Headwinds & Market Trends

The Canadian housing market’s recovery in 2025 is not without headwinds. New mortgage rules and subdued immigration targets are expected to limit runaway demand. Additionally, potential U.S. tariffs and global uncertainty may threaten certain job sectors and household stability.

Despite these concerns, analysts remain cautiously optimistic: lower interest rates should provide a floor for home prices, stabilize delinquency rates, and gradually support stronger sales metrics through 2026.​

Preparing for Renewal or Purchase: What to Do Next?

Whether you are renewing an existing mortgage or buying your first home, it is critical to understand your options in the current environment. Consult a mortgage advisor for personalized strategies, from locking in a fixed rate to exploring flexible variable solutions. Review your household finances, anticipate potential payment increases, and ensure you have a plan for fluctuating market and economic conditions.

Unlock your potential in today’s evolving market.

Reach out to Cannect for expert mortgage advice and discover opportunities tailored to your goals, whether you’re renewing, refinancing, or buying in 2025.